Innovation, networking activities and complementarity Empirical evidence on SME performances for a local economic system in Northern Italy

The paper addresses the relevancy of networking activities and R&D as main drivers of productivity performance and output innovation, for small and medium enterprises (SME) playing in a local economic system. The aim is to provide new evidence on the complementarity relationships concerning different networking activities and R&D in a local SME oriented system in Northern Italy. R&D arises a main driver of innovation and productivity, even without networking. The complementarity between diversified networking activities and R&D/innovation is found only in a discrete setting, signalling the necessity of surpassing critical thresholds. In any case, the complementarity with networking is a consequential step, following investments in R&D. Networking by itself cannot thus play a role in stimulating productivity and innovation. It can be a complementary factor in situations where cooperation and networking are needed to achieve economies of scale and/or to merge and integrate diverse skills, technologies and competencies. This is compatible with a framework where networking is the public part of an impure public good wherein R&D plays the part of the private-led driving force towards structural break from the business as usual scenario. Managers and policy makers should be aware that in order to exploit asset complementarity, possibly transformed into competitive advantages, both R&D and networking are to be sustained and favoured. Networking elements are crucially linked to innovation dynamics; it is nevertheless innovation that explains and drives networking, and not the often claimed mere existence of local spillovers or of a civic associative culture in the territory. Such public good factors exist but are likely to evolve with and be sustained by firm innovative dynamics